Monthly Dividend ETFs for 2022
Investors have loved dividend-paying stocks for as long as stocks have been around. However, some investors don’t want to hunt down the best ones, so they turn to the best monthly dividend ETFs instead. Dividends are a great way for investors to gain from the profit of their stock companies. When companies earn profits, they may pay part of the profit to shareholders in cash.
What an investor does with the cash received through dividends can make a big difference in the long run. How often a company pays shareholders the dividend can have a big impact too. Most of the time, companies issue quarterly dividends. On occasion, they may also pay annual or special dividends.
Less commonly, companies will pay a dividend every month. A dividend paid more often can benefit certain investors. For instance, retired investors may use cash dividends for income. Also, younger investors who are saving may need to reinvest the cash.
Best Monthly Dividend ETFs for Retirees
Investors are often don’t want to hunt down the best dividend-paying stocks. If you’re in that boat, choosing the best monthly dividend ETFs could be a great solution. A monthly dividend ETF holds a basket of monthly dividend-paying stocks. The ETF manager selects the basket.
Retired folks may use cash dividends to pay bills, travel, or do other fun things. If cash dividends only come once per quarter, planning for income can be a tough task. Imagine if your paycheck only came four times per year! Less frequent quarterly dividends can add complexity for retired investors.
A monthly income stream can make your golden years easier to manage. For example, budgeting your income needs for one month is much easier than budgeting three months ahead of time.
Best Monthly Dividends ETFs for Savers
For savers not interested in stock-picking, choosing the best monthly dividend ETFs may also be ideal. Though savers are much different than retirees, dividend frequency can be equally important.
Savers can compound investment returns by reinvesting cash dividends. Savers won’t typically use cash dividends to pay their bills. But they want to use the cash to compound their portfolio returns over time. Reinvesting cash dividends monthly can allow savers to reinvest more often than quarterly or annually. All else being equal, monthly reinvestment can improve your portfolio return handsomely in the long run.
More frequent cash dividend payments can allow savers to take advantage of short-term opportunities in their favorite stocks. Those short-term opportunities might not wait around for your next quarterly dividend payment. Savers who like to pick their own investments may prefer monthly dividends.
More on Monthly Dividend ETFs
Interestingly, quarterly dividend-paying stocks are not necessarily on the same schedule. For instance, Company A may pay a cash dividend in January, April, July and October. Company B in February, May, August and November. Finally, Company C may pay dividends in March, June, September and December.
If you or your monthly dividend ETF were to hold a portfolio of these three quarterly dividend-paying stocks, you could get a dividend every month. You or the ETF manager could create a monthly dividend stream by investing in staggered quarterly dividend-paying stocks.
Readers should keep in mind not all dividend-paying investments are common stock companies. Real Estate Investment Trusts (REITs) are often a favored dividend-payer. As the name implies, REITs invest in real estate. REITs pool assets, make real estate investments and payout profits similar to owning physical real estate.
In addition, Master Limited Partnerships (MLPs) and preferred stocks offer a similar experience. MLPs usually invest in oil, gas, and other commodities. A company’s preferred stocks rank higher in seniority than common stocks and typically offer a higher dividend than common shares.
Monthly dividend ETFs often invest in REITs and MLPs to produce dividend income for investors.
Monthly Dividend ETFs for 2022
Consider the following options if you’re looking for a hands-off monthly dividend ETF for 2022.
- Global X SuperDividend US ETF (NYSE: DIV): This ETF has made monthly payments for eight years in a row. DIV holds 50 of the highest dividend-paying equities in the United States. The equities in the portfolio have the potential to increase dividend payments over time.
- Invesco S&P 500 High Dividend Low Volatility ETF (NYSE: SPHD): This ETF seeks high dividend-paying stocks that offer low volatility. Most of the stocks that it holds are common stocks.
- iShares Preferred and Income Securities ETF (Nasdaq: PFF): PFF goes beyond common stock. The ETF portfolio holds a diversified basket of high dividend preferred and common stock.
- SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA): DIA seeks to provide returns and yields similar to the Dow Jones Industrial Average. Though, DIA might not pay the highest dividend, it could offer a higher return on the stocks in its portfolio.
About BJ Cook
BJ Cook is a long-time stock nerd. He has held several roles in the equity research world and earned the right to use the CFA designation in 2014. When he’s not writing for Investment U, you can find him searching for new investment ideas. Outside the investment community, BJ is a die-hard Cubs fan.